Results From HealthCare Appraisers’ 2013 ASC Valuation Survey

Since 2003, HealthCare Appraisers has published nine annual surveys reporting valuation multiples and related topics in the ASC industry to provide a centralized source of market intelligence of valuation trends. During an Oct. 24 session at the 20th Annual Ambulatory Surgery Centers Conference in Chicago, Todd J. Mello, a founding partner, and Nicholas A. Newsad, a senior associate at HealthCare Appraisers, shared some results from the 2013 survey.

Interest providing absolute control (greater than a 50 percent ownership where key aspects of control are not diminished by governing documents or other factors), are worth significantly more than interests that do not have the same control rights. The majority of the valuation multiples were found to be between 3 and 3.9 for minority interests in single-specialty ASCs, and between 3.5 and 5 for multispecialty ASCs. For controlling interests in single-specialty ASCs, the valuation multiples were mostly between 6 and 6.9, and for controlling interests in multispecialty ASCs, the multiples were even higher, falling between 6 and 8.

“Since 2010, these multiples have shifted up for both single and multispecialty centers,” said Mr. Mello. “This shows the industry is still very robust, and there’s stil a lot of interest in this space.”

Out-of-network ASCs were not valued as highly. The survey showed 66 percent of potential ASC buyers would shy away from centers where the out-of-network revenue goes up to 40 percent. Just less than 70 percent of buyers “convert” out-of-network revenue streams to in-network for valuation purposes. “Generally, the valuation multiple is going to decrease if it’s out-of-network,” said Mr. Newsad, “though it depends on what’s happening in the market.”

The survey also found the going rate for ASC management fees is about 5 to 6 percent of the center’s net revenue. Additionally, 38 percent of management companies have minimum fees, and 59 percent have sliding scale fees where the fee goes down after a predetermined revenue threshold.

Mr. Newsad emphasized the salaries of full-time dedicated center administrators are not usually included in these fees. “I’ve never seen one that pays the administrator at their own cost,” he said.